US Treasury Yields Hit Multi-Year Highs on Inflation Fears

US Treasury yields have surged to multi-year highs as inflation concerns resurface. The 10-year yield climbed above 5.30% on Monday, driven by increased bond selling and rising inflation expectations. The Institute for Supply Management (ISM) reported that while business activity in the services sector slowed, input prices jumped to 74.0, signaling higher costs for companies.

The rise in yields comes amid France’s fiscal challenges, which have heightened investor worries about global borrowing costs. Meanwhile, the ISM Services PMI fell to 54.9, below estimates of 55, though new orders and employment sub-components showed improvement. The 30-year and 10-year Treasury yields also reached multi-year highs as energy prices fueled inflation fears.

In commodities, West Texas Intermediate (WTI) crude oil dropped over 2% to $89.29 on Monday following the G7’s decision to release over 100 million barrels of crude and diesel, easing supply concerns. The weaker-than-expected US jobs report last Friday, showing only 29K new jobs compared to the forecast of 90K, initially cooled yields but inflation fears quickly rebounded.

Looking ahead, traders are watching the release of ADP Employment Change figures and the FOMC monetary policy meeting minutes. The probability of a Federal Reserve rate hike in October has fallen to 24%, with markets pricing in a 76% chance of rates remaining unchanged at the October 27-28 meeting.